[GNC] Accounting for Income and Expenses from Multiple Business Locations PS

[Michael or Penny Novack]

I think I should add ----- I am pretty sure that "cost of goods sold" is 
related only to goods being sold. Yes of course, when providing a 
service there may well be costs from consumables used in that service. 
But how  you account for those costs (when "expensed") is different.

Thus -- the salon ALSO "sells" its customers hair coloring, shampoo, 
etc. to take home with them. THESE products, when bought, are not 
immediately an expense but are inventory. You get to expense them only 
WHEN sold (increase cost of goods sold and decrease inventory). On the 
other hand, when you buy shampoo to be used to wash customers hair in 
the salon (part of the expense of providing the service) these can be 
taken as an expense immediately when purchased. Don't have to wait until 
used.

PLEASE NOTE: Organizations often faced with not knowing (when purchased 
for inventory) whether will be sold or given. Take "tee shirts". These 
might BOTH be being sold to raise money (cost of goods sold) AND 
sometimes given to volunteers (recognition). My practice was to treat 
new batches of tee shirts as inventory, waiting until known what sort of 
expense till sold or given. Only if the ones given to volunteers were 
different would I treat that batch as an immediate expense.

I put this bit (about organizations and tee shirts) as it is possible 
the hair salon rarely sells product but might, say to a favored 
customer. Here we have the reverse situation. The product had NOT been 
placed into inventory when the product batch bought but expensed . So 
now when sold, we debit "cost of goods sold" and credit that expense 
(instead of inventory batch)

Michael D Novack

>> Expenses
>>
>>      
>>
>>       Cost of Goods Sold
>>
>>            Shampoo
>>
>>            Scissor Sharpening
>>
>>            Hair Coloring Product
>>
>>